During Asian trading hours on Monday, US Treasury yields rose as efforts to resolve the Middle East conflict suffered another setback, pushing oil prices higher.
After President Trump rejected Iran's proposed ceasefire plan, peace negotiators are urging Iran to make concessions on its nuclear program in order to restart ceasefire talks with the United States.
Jefferies global economist Mohit Kumar said in a report: "Unfortunately, we are now in a world dominated by a single factor, where oil prices are influencing interest rates, and interest rates have become the primary driver for all asset classes."
The stalled negotiations pushed oil prices higher, with near-month Brent crude futures rising 3.4% to $107.91 per barrel.
Rising oil prices are keeping inflationary pressures elevated, which in turn reinforced market expectations for further Federal Reserve rate hikes. Currently, money markets are pricing in a 68% probability of a 25 basis point Fed rate hike in October.
Citi strategist Jason Williams said in a report: "In our view, the US Treasury market is currently experiencing a mild buyer's strike." He said that last week's strong purchasing managers' index data and hawkish remarks from Fed officials "may be keeping buyers on the sidelines."
According to Tradeweb data, US Treasury yields are hovering near recent multi-year highs, with the 10-year Treasury yield rising 3 basis points to 5.210%.
Williams said that given the lack of Treasury issuance this week, the US Treasury market may get some breathing room. He stated: "So far in 2026, US Treasuries have tended to sell off more easily during weeks with auction supply than during weeks without supply."
However, JPMorgan strategists maintained their bearish view on US Treasury duration due to upcoming labor market reports and technical factors, but they said the current bearish bias is no longer as strong as it was in recent weeks.
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